hump.
There seems to be a generally accepted argument that if/when Vancouver’s real estate market hits a downturn it will be Condominium prices that will be hardest hit. This idea seems to be based on a couple of factors: Houses come with land attached which adds value, and Vancouver’s previous experience with the leaky condo disaster hit condo values hard.
In light of this it is interesting to see what the REBGV detached benchmark price has done in the last six months:
As you can see prices didn’t stop rising after the July assessments values were recorded, they continued to rise for a couple of months, peaking in September 2006 and sliding down since then. According to the Real Estate Board of Greater Vancouver the ‘benchmark’ single family detached home is worth just slightly less than it was in July ‘06.
The REBGV benchmark for attached and apartments also peaked in September ‘06, but neither has dropped below their July value yet:
Attached is pretty flat, while the apartment benchmark dropped about 5 grand before it ticked up slightly last month. Any bets as to when we’ll see the peak price of September ‘06 again?
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January 17th, 2007 at 11:26 am
January 17th, 2007 at 11:34 am
January 17th, 2007 at 1:33 pm
January 17th, 2007 at 1:42 pm
Inventory is increasing and sales are decreasing. The nominal price declines will take place through 2007 until 2009 followed by 4-5 years of stagnation and no real growth in prices.
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January 17th, 2007 at 3:20 pm
The drops in SFH & Apartment prices looks like we might have problems getting buyers who can afford these prices: first timers for apartments and ‘move-up’ buyers for detached. I wonder if the flatness in attached units is demand from families that can’t afford detached prices?
As Rob Chipman has pointed out, new families with kids tend to be buyers that can’t wait and feel they need to buy something no matter what the market. Will this keep attached prices safer than entry level apartments or expensive houses?
January 17th, 2007 at 3:42 pm
Inventory is increasing and sales are decreasing. The nominal price declines will take place through 2007 until 2009 followed by 4-5 years of stagnation and no real growth in prices.
I’m a bit confused. If prices decline for several years, and then stagnate for several more, how can nominal prices match what they are now?
Did you mean that nominal prices would then increase to match today’s prices, or (I’m hoping this is not the case, since you appear to the economic’s guru around here) did you mean real prices when you typed nominal prices?
I’m betting that we’ll see nominal prices matching the September ‘06 peak in 2012, and that we won’t see the same prices in real terms within my lifetime.
January 17th, 2007 at 3:58 pm
January 17th, 2007 at 4:38 pm
January 17th, 2007 at 4:41 pm
Like the 1930’s, it will be generations before people forget the pain of being upside-down in a mortgage, with declining job prospects.
Have you heard about the new requirements for margin trading in the US? It sure looks like 1929 redux to me.
January 17th, 2007 at 4:45 pm
Using my knowledge of the inner workings of Google, I found that “Nominal numbers — such as nominal wages, interest rates and gross domestic product (GDP) — refer to amounts that are paid or earned in money terms.” While “Real numbers — real wages, interest rates, and GDP — are corrected for the effects of inflation.”
January 17th, 2007 at 7:20 pm
2007: -7% to -10%
2008: -8% to -12%
2009: -2% to -8%
2010: 0% to 2%
2011: 0% to 2%
2012: 0% to 2%
2013: 2% to 5%
2014: 2% to 5%
2015: 2% to 8%
2016: 2% to 8%
I see this as fairly plausible based on history but really I have no clue and this is just a best guess. Anyone who tells you different is lying, unless its ‘the pope’ because he’s infallible! But this is how I see Sept ‘06 nominal prices coming around again in 8-10 years. If I’m wrong then I owe someone a $4 pint!
January 18th, 2007 at 12:42 pm
January 18th, 2007 at 12:44 pm
There is no more blood to be had from the stone of the average family in terms of housing. In Vancouver you now have to make due with what you have.
January 18th, 2007 at 12:57 pm
Way too soon. As someone else noted, the bottom will not come until after the 2010 Olympics, when the last dregs of bullishness are exhausted.
Then see several years of flat nominal prices. When real prices return to 2001 levels, we will probably see appreciation return to the historical trend.
No bubble like this for another generation (1981->2006->2031).
January 18th, 2007 at 1:14 pm
It does look like we may have hit the peak, but that doesn’t mean we couldn’t limp along for years before prices take the big hit that could really hurt a bunch of people.
If September WAS the market peak but we don’t get hit with any negative externalities it wouldn’t be unusual to see a deadcat bounce in the summer. There may yet be some squeezable demand out there willing to sign up for a 30 year term and live off Kraft dinner while they wait for future increases.
January 18th, 2007 at 1:24 pm
A pint is a pint. Make mine an Okanagan Spring Pale Ale. (Sold to Sleeman, then to a Japanese brewery, so it’s hardly a BC product anymore.)
January 18th, 2007 at 1:31 pm
January 18th, 2007 at 2:19 pm
You could be right and your crystal ball might be more polished than mine!
I agree about inflation and the inflation picture could fog things up quite a bit after this initial deflationary spike down to semi-reality in RE prices.
BTW - Regarding the pint - we can stick with any premium domestic beer that you wish. Whatever brewery you like. Sleemans is my fave.
January 18th, 2007 at 6:28 pm
Houses are now sitting on the market for months without any offers. It appears that sellers are reluctant to substantially lower the price on the off chance that the market has cooled for reasons other than price. So it is time to send sellers and realtors a clear message. Find something you like that has been on the market for a few months and then offer 20% to 30% below the asking price. Don’t expect success the first time out, but the more you do this the more you create the conditions for future success. If enough people do this, people will start talking to their neighbours and co-workers and soon the word will spread that the only buyers left are demanding a return to realistic pricing, and it will happen sooner rather than later. Granted some realtors may complain about taking a ‘low’ offer to a seller but you only need to show them the graph of average real estate prices from the past decade to demonstrate that your ‘low’ offer is in fact incredibly high and will provide the seller with a greater return than they could have ever dreamed of when they bought the house.
We are out doing this now. You might be amazed at how receptive many people are to any offer in this cooling market. Our biggest issue now is do we accept the current counter-offer before us at 15% below peak or do we hold out for 20+% below.
January 18th, 2007 at 10:23 pm
Respectfully disagree. By 2010, the economy will be clearly in the sh*tter, no one will have any delusions that the Olympics will save us, and instead everyone will be bitching about how many decades we’ll be stuck with the bill.
I’m betting that…we won’t see the same prices in real terms within my lifetime.
That, I do agree with.
January 19th, 2007 at 11:03 am
Though that may be a shock to some sellers, there are a number of anecdotes from realtors out there (Chipman, Will, etc) saying that even in multiple offer situations most everything is going for below asking price these days and the average seems to be 10-15% below asking price.
January 19th, 2007 at 2:47 pm
January 19th, 2007 at 8:53 pm
January 20th, 2007 at 1:14 am
No, I’ll wait a year or two before dipping my toes in with 30% off offers. And it won’t be the flippers who’ll get money but their lender.
January 22nd, 2007 at 8:52 am
January 27th, 2007 at 7:28 pm
That’s how the cycle works on a micro level and that’s what’s happening now.
Give it 12 months. If this is a true top prepping for the downside rather than a short-term correction, you will see short bursts of price increases complemented by steep drops before a sudden real drop when all heck breaks loose.
That’s what you’re seeing in the US real estate market. Market recently showed an“unexpected†boost last quarter and everyone is predicting the end of the price downcycle while experts-in-the-know like Bernanke expects further downside.